Customized Indexing Enables Boutique Financial Advisors to Effectively Compete with Big Brand Wealth Managers

• Tens of thousands of boutique financial advisors in the market today offer high-quality services to clients interested in the personal touch that many often feel is lacking from big-name financial institutions.

• While the largest institutional players and wealth managers have access to highly specialized analytical tools, the independent advisor community is essentially relegated to presenting already public information that is often already well known to their customers.

• The situation is changing as the combined power of cloud computing and big-data analytics creates opportunities to reduce the barriers to high-quality financial analysis.

Access to vast amounts of financial information and economic data has gone a long way toward democratizing the ability to participate in the investment advisory sector. Large financial institutions, however, continue to hold a persistent advantage over small and mid-sized advisors when it comes to offering highly-customized research and analysis to their clients. That said, the situation is changing as the combined power of cloud computing and big-data analytics creates opportunities to reduce the barriers to high-quality financial analysis.

So says Alex Berg, CEO of London-based Index One. This fully flexible and customizable cloud-based indexing platform allows users to precisely define the scope of analysis, weightings -- and other critical variables -- at a fraction of the cost of conventional tools and resources traditionally available to the financial advisory community.

Alex Berg, Index One

According to Berg, tens of thousands of boutique financial advisors in the market today offer high-quality services to clients interested in the personal touch that many often feel is lacking from big-name financial institutions. However, one of the big issues they face is that these small- and medium advisors lack access to critical – but expensive – resources.

Leveling the Analytical Playing Field

“While the largest institutional players and wealth managers have access to highly specialized analytical tools, the independent advisor community is essentially relegated to presenting already public information that is often already well known to their customers. These rudimentary tools are typically based on rigid indexes that cannot be tailored to address the best interests of specific clients in specific situations," says Berg.

Many, for instance, count on exchange-traded-fund (ETF) indexes to guide client conversations. These tools are usually not granular enough to put into perspective the more nuanced direction advisors would like to offer – and which clients expect to receive.

It is a gap in the market that can be served by affordable, capable and intuitive index platforms that can dynamically create and customize sophisticated indexes. Such platforms not only make it possible to mix and match the different variables that reflect areas of investor interest but can also lay the foundation for much more constructive conversations between advisors and their clients.

"Take, as an example, the growing interest in environmental, social, and governance (ESG) investing. It turns out that there are a lot of variances based on how different people define the specific characteristics of ESG. General indexes that track the category often include companies whose behaviors are not considered appropriate by some clients, while excluding organizations that other clients believe should be part of the category," says Berg.

A similar lack of subtlety plays out across different analyses, as small- and medium-sized advisors work to support their clients' long-term interests and objectives. The result, for both investors and advisors, is sub-optimal.

Investors are forced to choose between: 1) the high level of customer service they enjoy with smaller boutique providers; or 2) the research and analytically-intensive services offered by larger institutions. For their part, advisors are left to compete in the market with basic tools and access to common information that prevents them from exploiting analytical insights that could differentiate services from competitors – regardless of their size.

This is the problem statement that Berg and his team set out to address when Index One was launched in 2019.

“We wanted to offer the investment community a way to benefit from a more differentiated set of services by providing function- and feature-rich indexing tools that make it possible for advisors to demonstrate their individual ability to find insights and opportunities for their clients. We developed Index One to ensure that the advice and services provided by independent advisors reflect clients' personal convictions, market experiences and life objectives. We want to enable these conversations without analytical limitations,” he concludes.

For more information or to schedule a media roundtable, contact Melissa at mfisher@biztechreports.com